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Wednesday, August 1, 2012

America’s Worst Drought Since ’56 Threatens World Food Supply

Corn and soybeans in the U.S. Midwest baked in an unrelenting
heat wave this week with fears rising of big crop losses that will boost
food and fuel prices and cut exports and aid from the world’s top
shipper of the key crops.

The condition of the nation’s corn and soybeans as of Sunday
deteriorated even more than grain traders had feared, and the U.S.
Agriculture Department cuts its weekly corn crop condition rating by the
biggest amount in nearly a decade.

After weeks of growing drought some lucky farms have been doused
by scattered thunderstorms in the past few days. But weather forecasters
warned the heat and dryness would only intensify through the end of
July and possibly beyond.

“We’re moving from a crisis to a horror story,” said Purdue
University agronomist Tony Vyn. “I see an increasing number of fields
that will produce zero grain.”

The drought scorching the U.S. Midwest is the worst since 1956,
the National Oceanic and Atmospheric Administration said in a report
posted on its website on Monday. Drought is affecting 55% of the land
mass in the lower 48 states.

The corn crop is in the greatest danger. Plants are trying to
pollinate to let ears fill with kernels, a period when adequate moisture
is vital for final yields. The United States ships more than half of
all world exports of corn, which is made into dozens of products, from
starch and ethanol to livestock feed.

The USDA on Monday rated the corn crop – which had once been
estimated to total a record 14 billion bushels this year – at only 31%
good-to-excellent, down 9 percentage points on last week.

The soybean crop rating was cut to 34% good-to-excellent, down 6 percentage points from the previous week.

Chicago Board of Trade corn for December delivery has soared 54%
since mid-June, reaching a contract high of US$7.78 on Monday and
approaching its record price near US$8.

Soybeans for November delivery soared to a new contract high of US$15.97 before slipping back a few cents.

Crop watchers were alarmed that corn rated poor-to-very poor jumped to 38%, versus 30% last week and 11% a year ago.

“They’re moving corn from good-and-excellent condition to
poor-to-very poor in one week, which skips fair condition. What they’re
saying is it’s a lot worse than they thought,” said farmer Larry Winger,
who farms along the Illinois-Indiana border 30 miles south of Purdue,
commenting on the USDA report.

To make matters worse, Winger said, drought has created ripe
conditions for spider mites, which suck the moisture out of soybeans and
can slice yields in half. Japanese beetles and other pests were feeding
on Midwest corn, which can also develop toxic fungal diseases in
drought years, analysts said.

Both grains are exported around the world, raising concerns about
global food shortages and inflation. The impact on American grocery and
meat case prices may take time to be felt but will likely be seen in
inflation in coming months.

DISASTER AREA

Last week, U.S. Agriculture Secretary Tom Vilsack designated more
than 1,000 counties across the country as natural disaster areas due to
the drought conditions, the largest single designation in the history of
the USDA loan aid program.

In Nebraska, where most farmers irrigate their corn, flows in
streams and rivers had dropped so much that the state on Monday asked
1,100 of Nebraska’s 48,000 farmers and ranchers to stop pulling water
from the waterways and use wells instead.

Iowa and Illinois produce a third of U.S. corn and soybeans. But
prospects there have turned down sharply, raising fears losses will be
the worst since 1988, the last major drought.

Prospects for the later-developing Midwest soybean crop were
better than that for corn, though substantial rains were needed during
the next three weeks to salvage Indiana’s crop, Vyn said.

“The window for soybeans is closing,” he said.

Soybeans usually go through their key growth period of flowering
and pod-setting in August, a few weeks after corn in the Midwest. Soy is
used in scores of products, from paints and feeds to edible oils and
increasingly for soy-based diesel fuel.

AccuWeather meteorologist Erik Pindrock said a seemingly immovable
ridge of high pressure on Monday kept much of the central Corn Belt in a
dome of heat, and he predicted the hot, dry weather would persist
through July and possibly into August.

Monday’s heat matched high temperature records for the date in
many locations including Flint, Michigan, where it was 97 Fahrenheit (37
Celsius), and in Indianapolis, where it was 98 F, he said.

“We’ve seen Raleigh, North Carolina, tie its all-time record of
105 (F) degrees three times … so this is definitely a country-wide heat
wave,” Pindrock said.